Economic policy

More with Kentucky Center for Economic Policy

KENTUCKY – This week on “In Focus Kentucky,” we bring you discussions in state government on the two-year state budget and how lawmakers on both sides of the aisle are advocating for the need to maximize the impact of every dollar invested.

Jason Bailey is the executive director of the Kentucky Center for Economic Policy and during this segment, Bailey speaks on the House Republicans tax reform plan that would lower the state income tax rate from 1% to from 2023. This means that the personal income tax rate would be lowered from 5% to 4% with a trigger mechanism taking place in subsequent years to lower it further depending on the amount of tax revenue from the fund general that the state receives.

If Kentucky’s general fund tax revenue reaches $13.75 billion in one fiscal year, the personal income tax rate would be lowered the following calendar year to 3.5 percent.

In order to broaden the tax base, the measure would extend the sales tax to a number of services. This includes, among others, transportation services Uber and Lyft, rental services like Airbnb, and advertising, marketing, and graphic design services.

Groceries and drugs would remain exempt from state sales tax. The bill would also not reduce the state’s corporate income tax.

“Unfortunately, the House and Senate are not taking full advantage of the surplus to reinvest in education and other needs, and have set aside money for tax cuts. The proposals that have been put forward so far in the chambers are a very different. In the Senate, there is talk of one-time discounts of up to $500 to $1,000. In terms of discounts, unfortunately, this excludes Kentuckians and seniors with the highest incomes. low, but that would only provide a one-time rebate, as opposed to ongoing costs, recognizing that we have a surplus now, but won’t in the future.The House is taking a much more drastic approach, I would say, and ultimately destructive in that it reduces our revenue tax and putting in place mechanisms to actually eliminate our personal income tax which provides 40% of the state budget and provides no way to pay for that. They have introduced taxes on a bundle of services like event planning and photography, and hybrids and electric car, but these provide only a tiny fraction of what we would lose by individually reducing or eliminating our tax on revenue. The House is taking a very radical and ultimately destructive approach to our budget. And you know, I would say, the most extreme tax bill we’ve ever seen. Unfortunately, we only have a few weeks left in the session. And you know, this proposition has not been fully verified. I don’t think the public fully understands the implications of eliminating almost half of the state budget, but that’s what they’ve embraced,” says Bailey.

You can watch the full In Focus segment above.